Responsible business conduct accelerates social and economic development

February 5, 2021

Why stepping up the implementation of the UN’s Guiding Principles on Business and Human Rights makes sense for Ukraine’s businesses and government

Illustration: Milles Studio

Originally published in Interfax-Україна on February 9, 2021.

Global and regional business models are changing rapidly and a growing number of investors, producers and consumers worldwide are demanding more sustainable and socially-responsible policies, more ethical business conduct, greener and more decent jobs, gender equality and equal opportunities.

A tested framework to promote respect for human rights in the private sector

It is well known that unscrupulous and predatory business practices often lead to an abuse of human rights. These can for example include forced labour, numerous forms of discrimination, unequal pay or unequal treatment based on race, ethnic origin, colour, sex, national or social origin etc., unsanitary and unsafe working conditions, and little to no social protections. An estimated 450 million people working in supply chains around the world are often in particularly precarious situations with respect to their human rights.

In recognizing that voluntary corporate social responsibility (CSR) measures are not providing sufficient protection, the United Nations Human Rights Council (UNHRC) endorsed the United Nations Guiding Principles on Business and Human Rights (UNGPs) in 2011. The UNGPs clearly state that governments have a duty to protect human rights, and businesses have a responsibility to respect them. Both must provide access to remedy and remediation for rights violations, regardless of whether governments are able or willing to protect these rights.

Three Pillars of the United Nations Guiding Principles on Business and Human Rights

1) State duty to protect human rights

States must protect against human rights abuse within their territory and/or jurisdiction by third parties, including business enterprises. This requires appropriate steps to prevent, investigate, punish and redress such abuse through effective policies, legislation, regulations and adjudications.

2) Corporate responsibility to respect human rights

Business enterprises should respect human rights. This means they should avoid infringing on the human rights of others and should address adverse human rights impacts with which they are involved.

3) Access to remedy

As part of their duty to protect against business-related human rights abuse, States must take appropriate steps to ensure, through judicial, administrative, legislative or appropriate means, that when such abuses occur within their territory and/or jurisdiction those affected have access to effective remedy.

Businesses should also make grievance mechanisms available to identify and address any adverse human rights impacts.

The framework also calls on all governments to develop, enact and update national action plans on business and human rights as part of the state responsibility to protect its citizens.

Fortunately, there is a growing global movement of governments and companies taking up the UNGPs as minimum standards. The EU and EU Member States are amongst the key drivers of the move towards mandatory human rights due diligence procedures. Several EU Members States have already introduced mandatory due diligence legislation into their national legal frameworks and have established access to remedy procedures.

Acknowledging that voluntary action has not brought about the necessary change, the European Commissioner for Justice, Didier Reynders, announced in April 2020 that the European Commission is committed to introducing legislation in 2021 to make human rights due diligence mandatory for all EU companies. He made this announcement during a high-level online event hosted by the EU Parliament’s Responsible Business Conduct Working Group, during which the Commissioner presented the findings of the Commission study on options for regulating human rights due diligence requirements.

A good business

What the private sector and policy makers are starting to realize is that the UN’s Guiding Principles are not just good to implement for moral and ethical reasons: they are good for business, and good for the economy. For example, the UNGPs help companies to identify, prevent and mitigate risks of adverse corporate human rights impacts, including their operational and reputational risks. Recent evidence-based research shows that those companies that adhere to the UNGPs have even been better able to navigate the challenges of the COVID-19 pandemic than those companies that do not.

Another benefit comes from attracting Foreign Direct Investments (FDI). Global investors are more likely to invest in those businesses that do their best to retain jobs and protect labour rights and those that don’t may be at risk of discrimination lawsuits or public shaming. Many companies therefore actively brand themselves as adhering to the UNGPs as well as to the Sustainable Development Goals (SDGs) and the UN Global Compact. To mitigate the risks, many companies go beyond mere branding and compliance and are increasingly playing active and key roles in promoting democracy and the rule of law, and are supporting anti-corruption efforts, social protection and equal opportunities in the workforce.

Ukraine is in many ways at the forefront of all these developments and actively supports a number of international agreements from the SDGs to the Paris Agreement. In September 2019, for example, President Volodymyr Zelensky issued a decree to integrate the SDGs into all areas of national policy.  The legal commitment to respect, promote and fulfil human rights is enshrined in national law in Ukraine, and is integrated in international and regional agreements. However, despite general progress on human rights, there is much room to improve the adoption and implementation of the UNGP in Ukraine, and to leverage its many benefits.

Most Ukrainian companies may not yet be fully aware of the true benefits of adopting and implementing the UNGPs and as a consequence may be missing out on many opportunities, such as access to global and regional credits, FDI and global and regional supply chains. There may be many reasons for this including lack of awareness of the UNGPs, lack of capacity to implement the UNGPs, financial constraints, lack of knowledge of the demands and potential new market opportunities, legislative and procedural gaps and lack of incentives.

A shrinking population in search for better living conditions and decent jobs

Similar to other Eastern European States outside the EU, Ukraine continues to face a significant depopulation as millions of citizens migrate in search for decent jobs and improved living conditions. Because of these dynamics, the population of Ukraine is projected to drop from 43.7 million in 2020 to 35.2 million in 2050, a 19.5 percent decline. This trend could be reversed simply by adopting and adhering to the UNGPs on Business and Human Rights. This, together with a set of incentives and policies for people to stay or return to Ukraine, would contribute greatly to the further development of domestic economy.

The continued conflict in the east of Ukraine and the COVID-19 pandemic have both contributed to a difficult situation in Ukraine, forcing many businesses to lay off staff or shut down completely. Some sectors are in desperate need of access to financing and targeted incentives. A recent UNDP survey of the COVID-19 impact on micro-, small- and medium- sized enterprises (MSMEs) in the east of Ukraine, done in partnership with the Kyiv School of Economics, documented the difficulties many of them have faced during the pandemic.

The European Union is the most important export market for Ukraine, but has yet to be fully explored and developed. As the EU legislators, EU investors and clients are furthering the implementation of the UNGPs and moving towards mandatory human rights due diligence procedures, it is important that Ukraine be in step with this effort. Doing so could bring significant benefits in the form of decent job creation, sustainable economic growth, improved livelihoods, reduced inequalities and progress in human rights and all SDG indicators. Ignoring this opportunity could produce the opposite effects, further worsening the situation for Ukraine and its citizens.

Building forward better

Ukraine is facing significant socio-economic challenges due to the COVID-19 pandemic and the ongoing conflict in the east, and could be at increasing risk of a deeper socio-economic recession. To avoid the precipice and reorient the country towards a brighter future filled with shared prosperity and expanded opportunities for all Ukrainians, we must stay focused on the challenges and opportunities afforded by the UNGPs on Business and Human Rights. We should work more closely with businesses and those who work in and for them to build the country forward better in the wake of the COVID-19 pandemic. In doing so we must put human rights, gender equality and non-discrimination at the centre of all recovery plans. The UN Guiding Principles on Business and Human Rights provide a clear framework for this, and an opportunity to address the challenges that lie before us. Embracing this framework will bring numerous benefits to Ukraine, its government, the private sector and its citizens, including the youth and the most affected and vulnerable.   

Ukraine will not be able to overcome its current challenges unless all sectors work together to ensure that human rights principles, human rights due diligence and access to remedy are integrated into legislation and practices. This will require a solid and inclusive multi-stakeholder process fully owned by the government, businesses and the citizens of Ukraine to develop a National Action Plan on Business and Human Rights.

UNDP has a long history in Ukraine, supporting all levels of government, businesses and the oversight institutions and organisations, including Parliament and civil society organizations (CSOs). We are also actively involved in supporting the development of a vibrant and inclusive private sector, assisting with skills development, market analyses and resilience work. With this experience and drawing on our global network of offices in more than 170 countries, we intend to continue working with all our partners in the private and public sectors to promote and fully adopt the UN’s Guiding Principles on Business and Human Rights for the benefit of the country and people of Ukraine.